Variable and Absorption Costing

The following data were adapted from a recent income statement of Ansara Company for the year ended December 31:

(in millions)
Sales	$17,540
Cost of goods sold	$(14,910)
Selling, administrative, and other expenses	(1,580)
Total expenses	$(16,490)
Operating income	$1,050

Assume that $3,860 million of cost of goods sold and $880 million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows:

Beginning inventory	$2,100
Ending inventory	$2,460

Also, assume that 20% of the beginning and ending inventories were fixed costs.

Question Content Area

a. Prepare an income statement according to the variable costing concept for Ansara Company. Round numbers to nearest million.

Ansara Company Variable Costing Income Statement (assumed) For the Year Ended December 31

Contribution marginFixed manufacturing costsSalesVariable cost of goods soldVariable selling and administrative expensesSales		$Sales
Variable cost of goods sold:
Beginning inventory	$fill in the blank 82f2c5ffb021ff1_3
Manufacturing marginSalesVariable cost of goods manufacturedVariable cost of goods soldVariable selling and administrative expensesVariable cost of goods manufactured	Variable cost of goods manufactured
Contribution marginEnding inventoryFixed manufacturing costsManufacturing marginVariable cost of goods manufacturedEnding inventory	Ending inventory
Manufacturing marginSalesTotal variable cost of goods manufacturedTotal variable cost of goods soldTotal variable selling and administrative expensesTotal variable cost of goods sold		Total variable cost of goods sold
Contribution marginFixed manufacturing costsManufacturing marginVariable cost of goods soldVariable selling and administrative expensesManufacturing margin		$Manufacturing margin
Contribution marginFixed factory overheadManufacturing marginVariable cost of goods soldVariable selling and administrative expensesVariable selling and administrative expenses		Variable selling and administrative expenses
Contribution marginFixed selling and administrative expensesManufacturing marginSalesVariable cost of goods manufacturedContribution margin		$Contribution margin
Fixed costs:
Fixed contribution marginFixed manufacturing costsFixed salesVariable cost of goods manufacturedVariable cost of goods soldFixed manufacturing costs	$Fixed manufacturing costs
Fixed selling and administrative expensesFixed manufacturing marginVariable cost of goods manufacturedVariable cost of goods soldVariable selling and administrative expensesFixed selling and administrative expenses	Fixed selling and administrative expenses
Contribution marginOperating incomeManufacturing marginSalesTotal fixed costsTotal fixed costs		Total fixed costs
Operating incomeOperating lossOperating income		$Operating income